Moneyness Simplified (ITM, ATM, OTM)
"Moneyness" describes the relationship between the Strike Price and the Spot Price. It determines the intrinsic value of your option.
The Cheat Sheet
For CALL Options
You want market to go UP
For PUT Options
You want market to go DOWN
Why does it matter?
ITM options behave like the stock. They have high Delta (0.6 to 1.0). If Nifty moves 100 points, an ITM option might move 80 points.
OTM options are "lottery tickets". They have low Delta (0.1 to 0.4). If Nifty moves 100 points, an OTM option might only move 20 points.
Beginner Mistake: Buying OTM options because they are "cheap". They are cheap for a reason—the probability of profit is low!
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.